Support

A cookie is a piece of data stored by your browser or device that helps websites like this one recognize return visitors. We use cookies to give you the best experience on BNA.com. Some cookies are also necessary for the technical operation of our website. If you continue browsing, you agree to this site’s use of cookies.

Marketing Services

Bloomberg Next marketing services allow clients to elevate their brands and extend their reach through our established and trusted expertise, enhanced with engaging event production, appealing design, and compelling messaging.

U.S. Estate and Gift Tax Treaties (Portfolio 6896)

Be a trusted advisor to your clients with Bloomberg Tax Portfolios. In this Portfolio, our expert authors describe the purpose, operation, and construction of the 17 estate and gift transfer tax treaties to which the United States is a party, as well as the income tax treaty with Canada, which bears on U.S. transfer taxes as well as Canadian income tax at death.

Description

The U.S. Estate and Gift Tax Treaties Portfolio is divided into six parts. Part I: Introduction, explains the purpose and types of transfer tax treaties. Part II: Situs-Type Treaties, describes when situs-type transfer tax treaties apply and explains how a situs-type treaty assigns primary taxing jurisdiction to one country. It also analyzes the effect that situs-type treaties have on the deductions and credits of treaty countries. Part III: Domicile-Type Treaties, describes when domicile-type treaties apply and how these treaties assign primary taxing jurisdiction. It also analyzes the situs rules that are incorporated into domicile-type treaties, the effect that domicile-type treaties have on the deductions, exemptions, and credits of treaty countries, and the general operation of the treaties' nondiscrimination provisions. Part IV: Special, Administrative, and Enforcement Provisions, discusses the ways in which transfer tax treaties enable a treaty country to enforce the collection of death taxes and exchange information with the other country, as well as issues that a taxpayer subject to a treaty may face in reporting income. Part V: Treaty Interpretation, sets forth the principles of treaty interpretation and construction. Part VI: Particular Treaty Analysis, discusses the details of each transfer tax treaty.

Authors

Our portfolios are written by leading tax
professionals who set the standard as leaders in their fields. The U.S. Estate and Gift Tax Treaties Portfolio was authored by the following
attorneys.

Jeffrey A. Schoenblum is a professor at Vanderbilt University School of Law in Nashville, Tennessee.

Credentials / Jeffrey received his A.B. from Johns Hopkins University (1970) and J.D. from Harvard Law School (1973).

Table of Contents

Portfolio 6896-1st: U.S. Estate and Gift Tax Treaties

Portfolio Description

Authors

Technical Advisors

Description

Detailed Analysis

I. Introduction

II. Situs-Type Treaties

A. Overview

B. Specific Considerations as to Whether a Situs-Type Treaty Applies

1. The Relevant Taxes

a. Limit to Death Taxes

b. Nonapplication to Gift Tax

c. Nonapplication to Generation-Skipping Transfer Tax

d. Nonapplication to State, Provincial, and Local Taxes

(1) In General

(2) Special Rule with Respect to Domestic Adjustments, Including at the Political Subdivision Level

e. Nonapplication to Income Taxes

f. The Meaning of “Estate Tax”

g. Hybrid Taxes

h. Section 2801

2. The Relevant Affiliation and Its Consequences

a. In General

b. Who Determines the Existence and Meaning of the Affiliation?

c. Beneficiary

d. Deemed Citizens, Domiciliaries, and Residents

3. Situs of Estate Property

a. In General

b. No Applicable Treaty Situs Rules

(1) Situs in a Third Country

(2) Situs in Third Country, but Disagreement as to Which One

(3) Situs in Treaty Country or Third Country

(4) Situs in Other Treaty Country or Third Country

(5) Each Country Determines Asset Has a Local Situs

(6) Each Country Determines Asset Has Situs in Other Treaty Country

c. Applicable Treaty Situs Rules, but No Tax Imposed by Treaty Situs Country

d. Preliminary Issues in the Application of Specific Situs Rules

(1) Which Country Determines the Character of a Property Right or Interest

(2) The Character of Various Property Rights

(a) Immovables and Real Property

(b) The Character of an Equitable Interest of a Trust Beneficiary

(i) In General

(ii) Diverse Equitable Interests of a Trust

(A) Revocable Trusts

(B) General Power of Appointment

(C) Equitable Interests in Trust Involving No Right to Revest the Underlying Assets

(iii) The Importance of Determining Trust Situs When a Beneficial Interest Is Regarded as a Debt

(iv) The Role of State Law

(v) Transfers, Identity, and Timing Problems Involving Trusts

(vi) Mutual Funds and Retirement Plans

(vii) U.S. Characterization of Foreign Property Rights Analogous to the Trust

(viii) The Trust Distinguished from Other Relationships

(c) Other Unaddressed Intangible Interests

(i) Partnership Interests

(ii) Interests in LLCs, LLPs, and Similar Entities

(d) Bank Accounts

(e) Tort Claims

(f) Stock and Stock Options

(i) Stock

(ii) Stock Options

(iii) ADRs and ADSs

(g) Patents, Copyrights, Trademarks, Franchises, and Licenses

(h) Life Insurance

(i) Indirect Consequences of Situs Rules

(j) The Role of State Law

C. Deductions

1. In General

2. Marital Deduction

3. Charitable Transfers

4. Specific Exemptions

D. Credits

1. The Primary Credit

a. General Operating Rules

b. Valuation

c. Interest and Penalties Ignored

d. The Special Charitable Contribution Deduction Alternative to the Treaty Credit

e. Reductions Affecting the Amount of the Creditable Tax

f. The Availability and Amount of the Unified Credit in Calculating the U.S. Estate Tax of a Nonresident Alien

(1) In General

(2) U.S. Situs Assets Exempt under the Code

(3) The Effect of Lifetime Use of the Unified Credit

(4) Availability of Unified Credit for Gift Taxes

(5) Disclosure When Claiming the Treaty Unified Credit

g. Effects of Disputed Situs on Primary Credit

h. Gross-Up with Non-Situs Assets

2. The Secondary Credit

3. Comparison of the Treaty Credits and Unilateral Credits

a. In General

b. The Interplay Between § 2014 and § 2013

(1) In General

(2) Schedules P and Q

(3) Balancing the Variables

c. The Proper Credit Choice When Property Has a Situs in Both Treaty Countries or Neither Treaty Country

d. Limitations on Multiple Credits for the Same Property

e. The Impact of Taxes at the Political Subdivision Level

4. Claiming the Treaty Foreign Death Tax Credit

III. Domicile-Type Treaties

A. Overview

B. Specific Considerations as to Whether a Domicile-Type Treaty Applies

1. The Relevant Taxes

a. Not Limited to Death Taxes — Gift Tax

(1) Introduction

(2) Interrelationships

(a) Unified Credit

(b) Foreign Tax Credit

(c) Tangible Movable Property

(d) Gift-Splitting

(e) Taxable Gifts Includible in the Gross Estate

(f) Marital Deduction

b. Nonapplication to State, Provincial, and Local Taxes

c. Nonapplication to Income Taxes

d. Uncertain Application to Generation-Skipping Transfer Tax

(1) In General

(2) The Special Case of the U.S.-France Treaty

2. The Relevant Affiliation and Its Consequences

3. Identical or Substantially Similar Taxes

4. Fiscal Domicile

a. In General

b. The Personal Affiliations Relied Upon to Determine Fiscal Domicile

(1) In General

(2) Domicile of Dependency

c. The Meaning of “Permanent Home”

(1) In General

(2) Income Tax Treaty Guidance

(3) Unsettled Aspects

(4) Leading U.S. Determinations

(5) Leading Foreign Determinations

(6) The Determination of Permanent Home in Both Treaty Countries

d. Center of Vital Interests

(1) In General

(2) Leading U.S. Determinations

(3) Leading Foreign Determinations

(4) Refinements in the Application of “Closer Personal and Economic Relations”

e. Habitual Abode

(1) In General

(2) The Time Frame for Establishing Habituality

(3) Determining Habitual Abode When There Is a Permanent Home in Both Treaty Countries or Neither of the Treaty Countries

(4) Appropriateness of Domestic Law Meanings of Habitual Abode

f. The Citizenship Fallback and Override

g. The Final Fallback: Competent Authority

C. Situs Rules

1. In General

2. Real Property (Immovables)

a. In General

b. Livestock and Equipment Used in Agriculture and Forestry

c. Property Accessory to Real Property

d. Landed Property Rights

e. Usufruct, Legal Life Estate, and Trust Income Interests

f. Mortgages and Other Security Interests in Real Property

g. Interests in Entities that Own Real Property

3. Permanent Establishment

a. In General

b. The Requirement of an Enterprise

c. Fixed Place of Business

d. Place of Business

e. Carrying Out Business Through Place of Business

f. Enumerated Examples of Permanent Establishments

g. Building Sites and Construction or Installation Projects

h. Items Excluded from the Meaning of “Permanent Establishment”

i. Agents and Associated Companies

j. Related Entities

4. Fixed Base

5. Ships and Aircraft

6. Stock

7. Intangibles

a. In General

b. Partnerships

8. Tangible Personal Property

D. Deductions and Exemptions

1. In General

2. Deductions for Administrative Expenses and Debts

3. Charitable Deductions

4. Deduction or Credit for Spousal Transfers

a. In General

b. Applicability of Treaty Provisions in Light of Revisions to the Code Marital Deduction

c. The Impact of Other Treaties — The U.S.-Austria Friendship Treaty Example

d. Gift Tax Marital Deduction

E. Credit Provisions

1. In General

2. Credit for Taxes of Political Subdivisions

3. The Credit and Timing Differences in Taxation

4. The Credit's Interaction with the Domestic Credit for Tax on Prior Transfers

5. The Credit and Expatriate Taxation as to Expatriation Prior to June 17, 2008

6. Credits in the Case of a Short-Term Fiscal Domicile in the Non-Citizenship Country

All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to books@bna.com.

Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)

Notify me when updates are available (No standing order will be created).

This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to research@bna.com.

Put me on standing order

Notify me when new releases are available (no standing order will be created)